Analysis of Marketing Strategies That are Used By Zara and Uniqlo
Uniqlo's and Zara's value proposition
Zara caters to customers looking for ‘fast fashion’, or instant gratification, by putting new styles on the shelves every 4 to 6 weeks, unlike the most stores who just churn out one collection for spring-summer, and one for fall-winter season. They are also usually very quick to bring out new collections each season. Zara’s store design is their main form of marketing, always located at prime locations in big cities, the stores are centered on the four pillars of beauty, clarity, functionality and sustainability and are always eco-friendly.
The brand also ensures that only limited inventories of each styles are available at its stores, encouraging shoppers to keep popping into the stores, and chancing upon new items while browsing. According to Forbes, an average shopper will visit a store he or she likes about 4.1 times per year, whereas the average Zara shopper visits a Zara store 17 times per year. Most of Zara’s designers are hired directly from top design schools, with the agenda of replicating designs based on the latest runway trends. They also employ a market specialist for each country they have stores in to ensure constant communication with store managers at the Zara outlets around the world, as well as accurate, on demand data on customer feedback. Through this, Zara is able to come up with 40,000 new designs per year, while also always upgrading the existing designs.
Uniqlo on the other hand, invests in long-term basics that people intend to wear for a long time. The brand focuses on quality and value, rather than ‘fast fashion’. Uniqlo’s tagline is “simple made better,” and that is exactly what it does. Their clothes are more performance-oriented and basic casualwear that is sold at reasonable prices. They catered to minimalist styles instead of fashionable, but items were kept much longer on the shelves in comparison to its rival brands. Uniqlo’s entire process, from manufacturing, planning, designing, production through to retail is unified, to ensure consistency. This was done through a team which was managed by Takumi – or skilled textile artisans, who oversaw all operations and implemented quality control. The designers are always looking for updates on functional material, such as “Heattech, Airism and Blocktech” to create unique offerings.
Unique elements of Zara’s marketing strategy
In terms of product, Zara believed in ‘fast fashion’ by frequently introducing new collections, and in order to minimize wastage due to the quick turnover, Zara was diligent in testing new products in test stores, so as to minimize failure rates. Zara’s offerings were divided into Women, Men and Kids, with further sub-categories in the women’s category; Zara Woman, TRF, and Zara Basic. Of course, there were also accessories such as shoes, bags, jewellery, and perfumes to go along with the clothes.Zara’s pricing compared to its main competitor H&M was higher, but definitely still affordable, compared to many other similar brands in the market, based on my own observation. Zara spends almost no money on advertising, only 0.3% of its revenue goes towards it. Instead, Zara focused on placement of its stores. Placement is extremely important for Zara as it serves as its main form of marketing. Stores were located at the main shopping district in city centers of all major cities.
Also, according to Forbes, 65% of Zara’s production is based on proximity, and all of its products can be delivered from the factory by air within one day to any of its 4,400 stores.”Zara has been online since 2010. However, shoppers still prefer to visit the stores, as its online sales only account for a small minority, about 7% in 2016, of sales. However, Zara is the frontrunner in RFID technology, which allows for real-time inventories in a fraction of time in comparison to the barcodes that are used by most other retailers. This allows the store to track and promote the most popular styles. However, in true innovative style, “Zara is evolving with the times and now follow the 4Es - Experience replaces Product; Exchange is new Price; Evangelism is now Promotion; and Every Place is new Place,” according to Forbes.Uniqlo focused on growing its business by focusing on functional basic product styles that were of high quality and stayed in shelves longer, as opposed to responding to the quick trends of ‘fast fashion’, like Zara did.
Like Zara, they also catered to Women, Men, and Kids. Uniqlo’s clothes pricing were very affordable, especially for how long it lasts, so as to be able to cater to all consumers. Its operations are outsourced to low-cost markets such as China, Vietnam, Bangladesh and Indonesia, to ensure this can be managed. Uniqlo often placed its flagship stores in highly visible areas that are eye-catching, with some form of outward branding, so passerby’s will notice the store as well. Like Zara, Uniqlo’s presence is fairly limited on e-commerce with only 10% of products being sold online. However, Uniqlo spends slightly more, about 4% of its revenues on advertising.
Zara’s pattern of global sales
While Zara had been online since 2010, its online sales in 2016 accounted for only 7% of its total14%sales. This lagged considerably behind the apparel industry’s online share ofAsia Pacific had grown exponentially since 2008, exceeding both Europe and NorthAmerica, to account for US$594 billion in sales in 2016. While China along with the US dominated the industry with a combined 70% marketshare, emerging markets such as India were growing rapidly at a cumulative annual growth rate (CAGR) of 7%. In comparison, Zara, Inditex’s flagship retail format, generated 66% of the company’s overall sales in2016 with net sales of US$16.5 billion. Zara’s global reachincluded e-commerce presence in 39 countriesbesides 2,213 physical stores located in the central shopping districts of large cities across 93 countriesSince 2010, Zara had focused on progressively widening its e-commerce platform. By 2013, itwas receiving more than 1.3 million unique visitors online per day.26In 2015, it relented its paceof store openings from 8-10% to 6-8% growth in new sales space, in favour of an aggressiveonline expansion, and large flagship stores in place of the smaller one. Encouraging their shoppers to shop online more.
Differing fortunes of Zara in China and India
Asia Pacific, the most promising retail apparel market in the world, grew by 26% from 2011 to2016, and was predominantly driven by China and IndiaZara practised a pricing strategy unique toeach country China Chinese people like fashion very much. Second, because all of the economic development of the country, from the evolution of thecities to shopping mall development, to a lot of people moving from the country to the citieswith the thriving middle class in these emerging markets becoming increasingly fashion conscious. India, propelled by its robust economic performance, growing number of high earners and young demographic profile, thriving middle class becoming more fashion conscious, was expected to overtake Japan, Germany and the UK by 2021 to be the third largest retail apparel market at US$124 billion.
In 2016, after China, it was considered must Zara was keen to strengthenthe most attractive “-win” market by leading global retailers.its presence in the both these markets.zara spread to 193 stores by 2016, with China becoming its second biggestmarket after Spain.only in 2012 that it started to build its e-commerce capability in the country by setting up itsown online shopping website and publishing an m-shop application. Two years later, in 2014, it opened its official flagship store on T-mall the giant online mall with more revenues and users – than Amazon and Ebay combined.35the bulk of production took place in Asia, with China as the largest exporter of apparel in the world at 36.5%, followed by India,at 5.3%the landscape was getting redefined by the increasing penetration of non-store based retailing, with the apparel industry being one of the leading industries in terms of e-commerce adoption.
Technological advances such as smart phones and the ensuing shifts in consumer behaviour were further bridging the gap between offline and online retailmodel with a highly flexible and reactive supply chain capable of supporting large volumes in the shortest possible turnaround time (4-6 weeks). The Chinese apparel market was highly competitive with 70% of the 500 leading international luxury brands present in the country, and a fiercely combative large number of domestic players. Zara’s high pricing strategy in China, unlike Europe, placed it in direct line of firefrom the high-end players, and at a disadvantage vis-à-vis the local rivals. It also faced stiff competition from its key mid-market rivals.
Uniqlo preceded Zara in its entry to China by fouryears, and over 2002-16, established 560 stores across the country, while the international fast fashion brands like Zara and H&M were perceived as premium andaspirational by the Chinese consumers, the local players had dug much deeper inroads into themarketIndiaIn accordance with the country’s regulations on foreign direct investment, Zara entered the Indianmarket in 2009 through a joint venture with Trent Limited, a retail subsidiary of the Tata Group,an Indian multinational conglomerate.
By March 2015, Zara became the first apparel brand in India to have crossed the US$100 millionZara enjoyed the first mover advantage.Inadequate availabilityof prime retail locations in major cities limited Zara’s ability to pursue itsflagship store format strategy. The general lack of retail space in the country was compoundedby the regulatory constraints on foreign owned businesses in acquiring property. The lack of much seasonal weather variation across the country (mostly warmto hot weather with a very short winter) limited Zara in introducing its wider range of globalmerchandise.
Another challenge faced by the apparel retailer was in getting the sizes right. Unlikemost other countries, India neither followed international sizing standards, nor did it have its ownstandardised sizing charts due to large regional variations across different parts of the country. Moreover, the competition from the e-commerce apparel companies had also intensified, withapparel accounting for nearly 25-35% of the overall sales for online retailers like Amazon, Flipkart and Snapdeal. Despite being in India since 2010, Zara did not operate its own onlinesales platform and was limited to an online presence through third-party platforms. To overcome this, the company planned to launch its own fully integrated e-commerce store by theend of 2017.
